Store closing sales: Why you won't save as much as you think
The reality is that going-out-of-business sales are often the opposite of a bargain. Here's why.
It's been a tough few years for storefront retail chains. As online businesses like Amazon continue to grow unchecked, many major merchants have seen their profits plummet, and as a result, have been forced to close hundreds of their brick-and-mortar locations.
You've probably seen the fruit of these closures plastered to the inside of the windows on soon-to-be empty storefronts: "LIQUIDATION SALE!" "UP TO 80% OFF!" "EVERYTHING MUST GO!"
But despite what those imploring flashy signs might indicate, store closing sales are usually not filled to the brim with amazing deals. In fact, the reality is that going-out-of-business sales are often the opposite of a bargain. Here's why.
Liquidation companies take control and jack up the prices.
When a store goes out of business, it's safe to say the owners are in pretty dire financial straits. They need to take their remaining merchandise and turn it into as much cash as they possibly can -- and fast. In order to make this happen, failing stores will often hire liquidation companies to come in and flip their remaining stock for them.
These companies make their living off doing just this, and they've got it down to a science. This usually involves slapping new price tags on everything that hike the cost way up. Once the new prices are in place, they start advertising "sales" that take a certain percentage off the higher price, which means that, especially at the beginning of liquidation sales, the prices you're seeing are likely at or ABOVE what they usually are. Even though it looks like you're getting 50 percent off that new TV, if you peel back the new price tag you'll probably find that the item in question was cheaper before the sale started.
As this 2008 article on ABC News points out, "liquidators rarely sell merchandise at a loss, even near the end of the sale." According to Stephen Baker, a retail analyst quoted in the ABC piece, going out of business sales are basically psychological games to get people inside the store and excited about spending money.
The stores often won't accept their regular coupons, but make sure you spend gift cards before it's too late.
Once a store closing sale has begun and a liquidation company has taken over, you probably won't be able to use any of the regular coupons that the store in question used to offer. However, this rule typically doesn't apply to gift cards, so if you've got a few in your wallet for stores that are going out of business, you're gonna want to spend them -- it's now or never!
If the entire chain isn't closing, shop the stores that aren't for the best deals.
In recent months, we've seen a lot of chains -- like Sports Authority, Macy's, Walmart and RadioShack -- that have closed a small percentage of their retail locations around the country. In these cases most of the best merchandise from the closing stores will be sent to the locations that aren't closing instead of being "marked down" for a closing sale.
If you have a choice between shopping at a store that's closing and shopping at a location that's not, you'll likely find better deals at the location that's staying open. As we outlined above, stores that have been taken over by liquidation companies aren't bound by the pricing rules and practices of the industry. In the ABC article cited above, employees at a closing Circuit City (this was before the entire company went out of business) recommended that the reporter go to a "normal Circuit City" if they wanted to find better deals on TVs.
Liquidators can (and will!) hike up the price on items in order to increase their profit margin, and in addition to this, the return policy on items you buy at closeout sales is likely to be nonexistent, with items sold as final sale. If there are two of the same chain in your area and one is closing, stick with the store that's staying in business to save yourself both upfront cash and future hassle if something goes wrong.
If you still want to check out closing sales, keep your smartphone handy to price check.
If you still want to try your luck at closeout sales, go for it! Just make sure you stay informed about what the items you're shopping for are actually worth. I recommend bringing along your smartphone and browsing on Amazon or the websites of similar chain stores to see whether the price you're seeing on the tag is actually the best deal out there. If you're not seeing it for less anywhere else, then you've stumbled upon the rare store closing sale that's actually worth shopping.
This article first appeared at Brad's Deals.
The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.